NZ ELECTIONS: EMBASSY CONFIDENTLY PREDICTS

C O N F I D E N T I A L SECTION 01 OF 04 WELLINGTON 000715

SIPDIS

NOFORN

STATE FOR D (FRITZ),EAP/ANP, EAP/RSP, EAP/EP, INR/EAP
NSC FOR VICTOR CHA AND MICHAEL GREEN
SECDEF FOR OSD/ISA LIZ PHU
PACOM FOR J2/J233/J5/SJFHQ

E.O. 12958: DECL: 09/15/2015
TAGS: PGOV PREL NZ
SUBJECT: NZ ELECTIONS: EMBASSY CONFIDENTLY PREDICTS
UNCERTAINTY

REF: WELLINGTON 702

Classified By: Charge D'Affaires David R. Burnett,
for reasons 1.4(b) and (d).


1. (C) Summary: New Zealand's election race remains the
closest in years. We believe it likely the National Party
will get more votes than the Labour Government, but the real
question will be whether this would be enough to ensure a
National government. Mixed Member Proportional voting (MMP),
and the small parties' current struggle for survival, make it
difficult to predict which major party will be able to form a
government. In addition, National will need a higher minimum
number of votes to win than Labour, because the Nats have
fewer potential coalition partners. Given the many possible
outcomes, it may be days or longer before either major party
can form a government. End Summary.

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Labour back in front?
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2. (C) It's the last day before elections, and things look
as murky as ever. The week started off poorly for the Labour
Government. On Tuesday, the Prime Minister was shouted down
when trying to deliver a speech at Canterbury University.
Although she claimed a few National supporters were to blame,
other observers noted that a significant number of students,
normally assumed to be core Labour supporters, also
participated in the cat-calling. Then, a Fairfax-AC Neilson
poll released on September 14 showed a six-point lead for
National over Labour, at 43 vs. 37%, respectively. This
proved that Labour-Green claims that National was colluding
with the secretive Exclusive Brethren sect had failed to gain
traction. That same day, the media gave wide coverage to
reports that, as the result of a National Party request, an
ombudsman had ordered the Government to release Treasury's
original costing for Labour's student loan interest pledge.
The costs were far higher than the figures cited by Labour
when it introduced the initiative, and this, together with
the Government's original refusal to release the data,
implied both that there had been a cover-up and that there
was plenty of room for National's tax cut. The Government's
woes increased with the revelation that an associate minister
had weighed in with immigration officials on behalf of a Thai
visa overstayer, who then flew to Samoa to re-tile the
minister's roof for free. The PM was criticized in the
media, not for her minister's action, but for trying to sweep
the issue under the rug during this election week rather than
following her normal course of ordering an inquiry.


3. (C) Nevertheless, things at the end of the week look
better for the Government. A poll published yesterday showed
that 48% of voters believe Labour will win. Of three polls
published today, the last before the election, two showed
Labour in the lead. One, conducted by Herald-DigiPoll,
showed Labour comfortably sprinting to victory with a seven-
point lead over National (44.6% vs. 37.4). A fair number of
Kiwis we know also believe that the Government has not done a
bad enough job to push voters to take a risk and elect a
relatively unknown National-led Government.

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Still May Be National's Game
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4. (C) Despite this view and the Government's apparent
upswing, we nevertheless believe several factors will very
plausibly lift support for National over Labour tomorrow.
For one thing, the one poll this week that showed Labour well
in front -- Herald-DigiPoll -- is New Zealand's most
unreliable. It fails to take into account undecided voters,
its questions are reportedly biased, and its sample size is
relatively small. In addition, today's Herald poll was based
on questioning that began well over a week ago, before
Labour's decisive slide. Of the three other polls released
this week, two showed National well in front of Labour (the
aforementioned Fairfax poll and a One News-Colmar Brunton
poll published today, where National leads by 6 points.) The
third, last night's TV3-TNS poll, showed Labour leading by
just 1.8 points, well within the margin of error.


5. (C) There are other factors in National's favor. As many
as 10-30% of voters remain undecided, and in the past
undecided voters have tended to vote center right. Besides
National, this would include United Future, which has pledged
to enter coalition talks with whichever major party wins the
most votes. It also includes NZ First, the other potential
limited coalition partner for National. (NZ First's survival
and support for National are far from certain, however. More
on this later.) In addition, we suspect that polls are
under-representing National's support. In this
"politically-correct" environment, Kiwis are likely reluctant
to admit that their vote will be driven by a desire for a tax
cut and the wish to end special Maori privileges. Eighty-five
percent of people surveyed in a recent poll, for example,
claimed the tax issue would not influence their vote. This
just isn't credible, given that National's tax plan website
received over a million hits within days of posting and that
support for the party climbed back up at the same time.


6. (C) Many analysts' assumptions about why Labour may win
seem to us to resemble urban myth rather than solid analysis.
Those who believe the strong economy will work in the
Government's favor, for example, ignore the fact that many
voters are angry at Labour precisely because the budget is
running a surplus and yet many Kiwis will receive little or
none of that money. Analysts' claims that things don't seem
bad enough for people to want a change ignores the fact that
no Labour Government has ever won a third term, and that a
third term is almost unheard of for any party regardless. In
a country that resents the "tall poppy," people may simply
think that Labour's time has come. If it's a truism in the
States that elections are the incumbents' to lose, then the
parallel axiom here is that New Zealand voters tend to vote
governments out, not in. The striking thing about National's
campaign is that it has belied Labour's message that the
Government is popular and capable. Voters may be tempted to
send a signal that neither is the case.


7. (C) Certainly National seems to think it will win,
perhaps even by an absolute majority. The party has refused
to cast a life line to the doomed Act party, arguably the
potential coalition partner whose ideologies are closest to
the Nats. National has distanced itself from the heated
Tauranga race, where NZ First leader Winston Peters, a
potential coalition partner, has been trying to save his
party from defeat by dredging up an old sexual harassment
charge against National candidate Bob Clarkson. These
(in)actions seem to reflect a quiet confidence that National
has enough additional votes to win. They also reflect a
deliberate plan: well before the campaign started, National
strategist Peter Keenan told us the party would aim first and
foremost to gain a majority of party votes. The wisdom of
that approach appears to be bearing fruit, as National's
support grows and the two other center right parties, United
Future and NZ First, say they will throw their support behind
whichever large party gains the most votes. National's own
polling may also be showing them victory where other polls
haven't. One Wellington-area candidate has told us that
National polling of 3,000 voters found working class voters
in her district -- normally Labour supporters -- will vote
for her this election.

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Small Parties: Wrench in the Machinery?
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8. (C) But even if we are cautiously convinced that National
will win more votes than Labour tomorrow, there are many
possible reasons why this may not translate into a victory
for the Nats. Labour has more potential coalition partners
than National, so it could more easily form a government. In
fact, Labour could be the victor if it won as little as
37-38% of the vote, although at that low level of support the
resulting coalition (some arrangement with Greens,
Progressives, United Future, NZ First, and perhaps the Maori
Party) would be very unstable. Because the absolute minimum
floor for National is higher, at least 42-44% and possibly
more, the odds of it being able to form a government are
lower. Also, the Maori Party is set to receive just 1-2% of
the Party vote, but is likely to win more than this amount in
electorate seats. (It will likely win 3-4 of the special
Maori seats now occupied by Labour.) Under MMP, this will
create an "overhang" that increases the number of seats in
Parliament and, by extension, the percentage a party or
coalition will need in order to gain a majority. This too,
could work against National.


9. (C) Then there is the New Zealand First issue. The
party's declared post-election policy may not be as clear as
it contends, potentially creating still more confusion if the
Labour-National results are close. NZ First Leader Winston
Peters has declared his party will back whichever major party
wins the most votes, as has United Future's Peter Dunne.
Unlike United Future, NZ First has ruled out joining a formal
coalition, but would support the Government on
issues of confidence (ie, votes under which could topple the
Government) and supply (budget issues). Other NZ First
staff, however, have said the party will offer confidence and
supply support to whichever bloc of parties has the most
votes. In that case, NZ First would support a
Labour-Green-Progessive grouping if it had more votes than
National or a National-United Future alliance, even if
National had more votes than Labour. Peters has since
repeated his majority-party stance, but given his
personality, we could see him back away from this, especially
if the gap between National and Labour were very small. He
would doubtless cite the known preference of his party's
voters as the reason, as a majority of them reportedly favor
a deal with Labour over National. His real motive, however,
would be that NZ First would more easily play the spoiler,
and gain more recognition, in a Labour-Green-led coalition.
A National-United Future coalition would be more stable and
closer to NZ First's ideology on many issues, offering less
opportunity for NZ First to stand out.


10. (C) That is, however, only an issue if NZ First
survives this election. Although the party now on average
polls at 5-7 percent, in some polls it has not met the
minimum 5% party vote threshold. NZ First's only potential
electorate win is Winston Peters' seat, and as mentioned
earlier he is facing a difficult fight against the National
candidate in his Tauranga district. If he loses, and the
party fails to gain 5% of the party vote, they will be out.
The Greens, at 5-6 percent support, are very unlikely to win
any electorate seats, so will also be out of Parliament if
they fail to meet the party threshold. Whether Labour or
National gains from these parties' elimination from
Parliament depends on the scenario. If the Greens narrowly
miss the threshold, Labour would probably need much more
support than is now the case -- at least 40-1% -- to ensure
NZ First's support and the victory. If NZ First misses
narrowly, National will have no chance of winning without at
least 46% or more of the vote. If either Greens or NZ First
end up well below the threshold because they've lost
considerable support to a major party, then Labour is the
likely beneficiary of those votes in both cases and National
will probably lose.


11. (C) The other wrinkle here is that under MMP, if one or
both of those two small parties fail to reach the 5%
threshold and also fail to gain any electorate seats, most of
the party vote they do get will be reallocated
proportionately among the major parties. The same will
happen with Act's all-but-certain sub-5% party vote share.
This makes the final outcome of the race even harder to
predict.


12. (C) Unless one of the major parties wins an outright
majority or something close to that, it may be days before
negotiations with minor parties lead to a government.
Another wrinkle is that Winston Peters has threatened to sue
his opponent for allegedly exceeding campaign finance
limits. This could throw the outcome of the election into
doubt for weeks, especially if NZ First polls below the 5%
party vote threshold.

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COMMENT
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13. (C) Even if National loses, victory could be a mixed
blessing for Labour. The Government would probably need at
least 44% or so and a Green victory of at least 5-6 percent
to end with a relatively stable Labour-Green-Progressive
coalition. Lower Labour support, and/or a loss of the
Greens, makes any potential Labour-led Government far less
stable, as it would also have to include some combination of
United Future (which has rejected a formal coalition with the
Greens) the Maori Party (which hates Labour because of the
Foreshore and Seabed legislation) and NZ First (which is an
entity unto itself). A National victory (ie, National alone,
National-United Future, or National-United Future in a
limited voting agreement with NZ First) would be far more
stable.


14. (C) National's ability to create such a close race in a
time of relative prosperity and stability also shows that a
new Labour Government would have to satisfy an increasingly
restive public. Recent signs that the economy is slowing
will only add to the Government's pressures.


15. (C) Oddly, the real beneficiary of this race may be
United Future's Peter Dunne. If he ends in coalition with
National, many believe he will be made Foreign Minister. This
would ease concerns about National's "hidden agenda" with the
United States. Although Dunne has ruled out participating in
any government that formally includes the Greens, in recent
days Clark has indicated she may now opt for a voting
arrangement with the Greens instead of a formal coalition.
The Greens would likely accept this as they have nowhere else
to go, and this could open the way for United Future's
coalition participation. In this case, too, Dunne is rumored
to be a possible Foreign Minister. Either way would benefit
us: Dunne favors better relations with the United States and
his pragmatic, non-ideological bent would pass muster with
whichever major party ends up in opposition. End Comment.






Burnett